jack o. bovender chairman & ceo
DESCRIPTION
Jack O. Bovender Chairman & CEO. Health Care Market Outlook Strong. National Health Care Spending 1990 – 2010. U.S. Healthcare Expenditures ($ Billions). 12.0%. 13.4%. 13.3%. 14.8%. 15.4%. 15.9%. 16.4%. 17.1%. National Health Care Expenditures as a Share of Total GDP. - PowerPoint PPT PresentationTRANSCRIPT
Investor DayInvestor Day20042004HCAHCA
Jack O. Bovender
Chairman & CEO
Investor DayInvestor Day20042004HCAHCA 22
Health Care Market Outlook StrongHealth Care Market Outlook StrongU
.S. H
ealt
hca
re E
xpen
dit
ure
s($
Bill
ion
s)National Health Care Spending 1990 – 2010National Health Care Spending 1990 – 2010
National Health Care Expenditures as a Share of Total GDP
12.0%13.4%
13.3% 14.8% 15.4% 15.9% 16.4% 17.1%
Source: U.S. Centers for Medicare and Medicaid Services—National Health Expenditure Projections, 2003
Will the U.S. economy shift 2.3% of GDP to health care services over the next seven years?Will the U.S. economy shift 2.3% of GDP to health care services over the next seven years?
Investor DayInvestor Day20042004HCAHCA 33
Source: AHA Annual Survey, 1980 - 2002
27
28
29
30
31
32
33
34
35
36
37
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02
100
150
200
250
300
350
400
450
500
550
600
Outpatient Visits
Inpatient Admissions
Ad
mis
sio
ns
(mil
lio
ns)
Ou
tpat
ien
t V
isit
s (m
illi
on
s)
Inpatient Admissions and Outpatient Visits Inpatient Admissions and Outpatient Visits 1980 - 20021980 - 2002
Investor DayInvestor Day20042004HCAHCA 44
HCA Annual Environmental ReviewHCA Annual Environmental ReviewKey Findings and Actions, October 2003Key Findings and Actions, October 2003
•HCA’s core business strategy is sound. The Company’s focus will continue to be on market-leading positions in large, fast-growing urban communities.
•To compete more effectively in the outpatient area, the Company will establish a senior level operational unit focused on outpatient services. HCA anticipates making strategic acquisitions in outpatient services. (Marilyn Tavenner, President Outpatient Services, effective January 1, 2004)
•The Company intends to reduce capital expenditures from approximately $2 billion in 2003, to approximately $1.8 billion in 2004 (excluding acquisitions).
•HCA anticipates lowering its target ratio of debt-to-total capitalization from 55% to the low 50s by mid-to-late 2005.
Investor DayInvestor Day20042004HCAHCA 55
HCA Annual Environmental ReviewHCA Annual Environmental ReviewKey Findings and Actions, October 2003Key Findings and Actions, October 2003
•The Company’s current $1.5 billion share repurchase program will be completed in a judicious manner, as dictated by market conditions.
•HCA’s Senior Management and Board of Directors are evaluating a change to the Company’s existing dividend policy and expected to announce any changes in the Company’s existing dividend policy in the first quarter of 2004. (New quarterly dividend of $0.13 per share to be paid June 1, 2004).
•The company has revised its long-term earnings per share growth target after 2004 (rebasing for outlier reductions and higher bad debts) from mid-teens to low-double digits.
Investor DayInvestor Day20042004HCAHCA 66
Strong Cash Flow Trends Provide Strong Cash Flow Trends Provide OpportunitiesOpportunities
$1,301
$1,584
$2,046
$2,786 $2,822
$0
$3,500
1999 2000 2001 2002 2003
Net Cash Provided by Operating ActivitiesDollars in Millions
Excluding settlements with government agencies and investigation related costs.
New New Dividend PolicyDividend Policy
Share Share Repurchase Repurchase ProgramProgram
Capital Capital ReinvestmentReinvestment
BalanceBalanceSheetSheet
Investor DayInvestor Day20042004HCAHCA 77
HCA Capital ExpendituresHCA Capital Expenditures
ER & Outpatient Services19%/$720
Replacement Facilities3%/$98M
New & Expanded Services
18%/$740M
New Facilities10%/$395MBeds
14%/$550M
Surgery/Spec'l Units
22%/$870M
Land & Improvements
14%/$565M
1,565 New Beds
54 Facilities with Surgery and/or ICU/CCU expansions
Four NewFacilities
378 Beds
Open Heart, ImagingCardiology, Oncology, etc.
37 ERExpansions
37 ERExpansions
Distribution of Capital Dollars2002 and Beyond
Distribution of Capital Dollars2002 and Beyond
New Denver FacilityNew Denver Facility
Expansions
$0.0
$0.5
$1.0
$1.5
$2.0
2000 2001 2002 2003 2004E
Billions2000
$1.22001
$1.42002
$1.72003
$1.82004E
$1.8
Routine
Patient Safety & Infrastructure
New Facilities
Expansions
Investor DayInvestor Day20042004HCAHCA 88
$7.3 Billion$7.3 Billion
244 Million Shares244 Million Shares
38% of outstanding 38% of outstanding sharesshares
Average Price: Average Price: $30.03$30.03
Opportunities Of Having Opportunities Of Having Strong Cash FlowStrong Cash Flow
Share Share repurchase repurchase programprogram
$1.3B: 37.9M Shares1997
1998
1999
2000
2001
20032002
YTD 20041
1: 2004 purchases through 5-6-04 2: Includes other activities affecting share balance (stock option exercises, restricted grants, and ESPP activity).
$33.59/share$22.68/share
$930M: 41M Shares
$1.4B: 55.6M Shares $24.61/share$1.3B: 43.5M Shares $28.65/share$706M: 19.2M Shares$706M: 19.2M Shares $36.88/share$1.1B: 31.1M Shares $35.76/share
$422M: 10.0M Shares$42.19/share
650M Shares 12/31/96
465M Shares2 4/30/04
$282M: 6.2M Shares$45.53/share
Investor DayInvestor Day20042004HCAHCA 99
Our Commitment To…Our Commitment To…
…Enhancing Shareholder Value
…our Mission & Values
…Ethics and Compliance…Diversity
…Transparency of Earnings
…the Care and Safety of Our Patients
And above all else…
…the Care and Improvement of Human Life
…Reinvestment in Our Facilities
Investor DayInvestor Day20042004HCAHCA 1010
The Genesis of the Bad Debt/Charity The Genesis of the Bad Debt/Charity Care IssueCare Issue
22.222.2%%
23.523.5%%
21.221.2%%
22.222.2%%
17.017.0%%
19.219.2%%
29.729.7%%
23.523.5%%
15.115.1%% 15.415.4%%
19.719.7%%
16.716.7%%20.320.3%%15.415.4%%
19.319.3%%15.915.9%%
16.416.4%%
NationalAverage:15.2% 1
NationalAverage:15.2% 1
18.118.1%%
>20% Uninsured
15-20% Uninsured
<15% Uninsured
25.625.6%%
14.6%
22.822.8%%
HCA is in 14 of the 20 highest uninsured states, with 72% of its hospitals in those states
HCA is in 14 of the 20 highest uninsured states, with 72% of its hospitals in those states
HCAHCAWeightedAverage:22.6% 2
HCAHCAWeightedAverage:22.6% 2
1: U.S. Census Bureau “Health Insurance Coverage in the United States: 2002”.2: Kaiser Commission: Health Ins. Coverage of Nonelderly Adults 2001-2002.
13.1%13.1%
Investor DayInvestor Day20042004HCAHCA
Bad Debt, Charity Care, and Accounts Receivable Management
Milton JohnsonSenior Vice President & Controller
Joe SteakleySenior Vice President - Internal Audit
Beverly WallacePresident – Financial Services Group
Investor DayInvestor Day20042004HCAHCA
Milton JohnsonSenior Vice President & Controller
22
Investor DayInvestor Day20042004HCAHCA 1313
Bad Debts & CharityQuarterly Trending
$368
$123
$371
$143$411
$156
$431
$156
$428
$182
$577
$209
$566
$229
$636
$201
$694
$218
$0
$1,000
1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04
Bad Debts & CharityBad Debts & Charity
$610
$786 $795 $837$1B
$0
$587$567$514$491
Charity Bad Debts
$912
7.6% 8.3%10.6% 11.7%
7.6% 8.6% 8.1%10.3% 11.4%
0%
14%
1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04
Bad Debts/Net RevenueBad Debts/Net Revenue
33
Investor DayInvestor Day20042004HCAHCA 1414
Origination of Bad Debt Expense
Source of Bad Debt Expense1:
Uninsured Patients 75-80%
Co-Pay & Deductibles 20-25%
1. Management estimate for 12 month period ending 3/31/2004.
44
Investor DayInvestor Day20042004HCAHCA 1515
199.0 206.9 213.7 200.3 205.3 217.4 233.7 240.2 242.0
0
300
1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003 1Q 2004
Uninsured VolumeUninsured VolumeSame Facility - Percent Change from Prior YearSame Facility - Percent Change from Prior Year
Source: QMIRS/CASEMIX . Same facility based on current same facility definition for all quarters.
14,72216,087 17,136 16,111 15,782 16,473
18,416 17,961 17,944
0
25,000
1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003 1Q 2004
UninsuredAdmissions
7.2%vs.
PY2.4%
vs.
PY
7.5%vs.
PY
11.5%vs.
PY
13.7%vs.
PY
Uninsured/CharityER Visits
3.2%vs.
PY
5.1%vs.
PY
9.4%vs.
PY
19.9%vs.
PY17.9%
vs.
PY
(In Thousands)
Two quartersof stabilization
Three quartersof stabilization
55
Investor DayInvestor Day20042004HCAHCA 1616
Uninsured/Charity VolumeUninsured/Charity VolumeSame Facility - Percent of TotalSame Facility - Percent of Total
4.7%4.5%
4.3%4.2%
3.7%
4.1%4.4%
4.1%
3.9%
3%
6%
1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04
Uninsured/CharityAdmissions
18.2% 18.9% 19.5%19.2%17.1%17.5%18.3%17.7%17.0%
10%
25%
1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04
(Percent of Total)
(Percent of Total)
Source: CASEMIX. Same facility based on current same facility definition for all quarters.
Uninsured/CharityER Visits
66
Investor DayInvestor Day20042004HCAHCA 1717
Uninsured RevenuesUninsured RevenuesConsolidated - Percent Change from Prior YearConsolidated - Percent Change from Prior Year
$486.3 $502.4 $476.6 $469.5 $478.3$518.7
$572.6$620.9
$662.2
$0
$1,000
1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003 1Q 2004
UninsuredNet Revenue
20.1%vs.
PY
32.3%vs.
PY
38.4%vs.
PY
(In Millions)
1.6%vs.
PY
3.2%vs.
PY
77
Investor DayInvestor Day20042004HCAHCA 1818
Uninsured RevenuesUninsured RevenuesConsolidated - Percent of TotalConsolidated - Percent of Total
Uninsured
Net Revenue
9.7%
11.3% 11.3%10.7%
9.2%
9.5%9.8%10.4%
10.2%
0%
15%
1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04
(Percent of Total)
88
Investor DayInvestor Day20042004HCAHCA 1919
Self-Pay Accounts ReceivableSelf-Pay Accounts ReceivableBalance Sheet AnalysisBalance Sheet Analysis
3/31/043/31/04
Total Self-Pay A/RTotal Self-Pay A/R $3,209$3,209
Approximately two-thirds Uninsured and Approximately two-thirds Uninsured and one-third co-pay deductibles A/Rone-third co-pay deductibles A/R
Q1/03-Q1/04 Chg.Q1/03-Q1/04 Chg.
Increase in Self-Pay A/RIncrease in Self-Pay A/R11 $550 $550
Approximately 75% of increase is from Approximately 75% of increase is from uninsured accounts and 25% from co-pay uninsured accounts and 25% from co-pay
& deductibles.& deductibles.
1: Hospital Only1: Hospital Only
99
Investor DayInvestor Day20042004HCAHCA 2020
Unreserved Self-Pay Accounts Receivable(Dollars in Millions)
2Q 03 3Q 03 4Q 03 1Q 04
Total Self-Pay A/R $2,721 $2,867 $3,000 $3,209
Total Allowance for Doubtful Accounts 2,378 2,494 2,649 2,856
Net Unreserved Self-Pay A/R $343 $373 $351 $353
1010
Investor DayInvestor Day20042004HCAHCA 2121
103.6%100.8%
105.1%101.8%
105.9%
100.5% 99.6%103.0%103.5%
49 4950
51 51
4849
5150
90%
100%
110%
120%
130%
140%
150%
1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04
30
35
40
45
50
55
Accounts Receivable IndicatorsCash Collections % Adj. Net Revenue / Days in A/R
Cas
h C
olle
ctio
ns
Cas
h C
olle
ctio
ns
% A
dju
sted
Net
Rev
enue
% A
dju
sted
Net
Rev
enue
Days in
Acco
un
ts Receivab
leD
ays in A
ccou
nts R
eceivable
20022002 20032003 20042004
1111
Investor DayInvestor Day20042004HCAHCA 2222
Change in Hospital Accounting PolicyBad Debts
Move to reserving a percentage of Uninsured and Co-Move to reserving a percentage of Uninsured and Co-insurance accounts receivable, insurance accounts receivable, andand unbilled unbilled uninsured revenue during the period.uninsured revenue during the period.
Each hospitals’ uncollectability percentage will be Each hospitals’ uncollectability percentage will be updated quarterly based on the hindsight analysis updated quarterly based on the hindsight analysis results.results.
Aggregate uncollectability percentage will decrease Aggregate uncollectability percentage will decrease due to inclusion of unbilled uninsured revenue in due to inclusion of unbilled uninsured revenue in base.base.
To be fully implemented in 2Q 2004To be fully implemented in 2Q 2004
1212
Investor DayInvestor Day20042004HCAHCA
Joe SteakleySenior Vice President - Internal Audit
1313
Investor DayInvestor Day20042004HCAHCA 2424
Scope of Quarterly Hindsight Project
• Hindsight now performed quarterly
• Over 2,000 hours per quarter to complete
• Each Hindsight Project:– Test approx. 130 hospitals
• Sample comprising 90-95% of the Company’s Hospital billed patient A/R and Net Revenue
– The resulting Day Metric applied to 163 hospitals
– Remaining 27 of 190 Hospitals:• HealthONE – 6
• Recent Acquisitions/New Facilities – 13
• International – 8
1414
Investor DayInvestor Day20042004HCAHCA 2525
Hindsight Theory:
Best Predictor of Current Allowance
is Past Results
January 31, January 31,
2003 2004
1515
Investor DayInvestor Day20042004HCAHCA 2626
55%
30%
100%
13%
2%
0%
20%
40%
60%
80%
100%
January-03 January-04
Collected/Contractual Recovered Written-Off A/R
1/31/03 - Hindsight Date
A/R > 1 yr
Bad Debt & Charity Write-Offs
2/1/03 <- Hindsight Period -> 1/31/04
Collected or Contractual
Recoveries
Source: 134 hindsight hospitals reviewed 1Q 2004
1616
Investor DayInvestor Day20042004HCAHCA 2727
Hindsight Allowance Calculation
Write-Offs (BD & Charity) as of 1/31/03 A/R (A) $ 1,641
Less: 3-year Avg. Recovery Percent 5.8% (95)
Equals: Net Write-Offs (BD & Charity) (B) $ 1,546
A/R > 1 year at 1/31/04 $ 656
Times: 3-year Avg. Uncollectible Percent 79.3%
Estimated Uncollectible A/R > 1 year (C) $ 520
Hindsight Allowance at 1/31/03 $ 2,066(B+C)
(in millions)
Source: 134 hindsight hospitals reviewed 1Q 2004.
1717
Investor DayInvestor Day20042004HCAHCA 2828
Conversion of Hindsight Allowance to a Day Metric
1/31/03 A/R Agings for a sample size of
134 Hospitals
Allocation of $2,066 million Days
Over 150 $ 1,645 $ 1,645 100%
121-150 291 291 100% 120
91-120 371 130 34.92% (10.48)
0-90 2,931
Total $ 5,238 $ 2,066 109.52
Hindsight Allow. expressed as a Day Metric = 110 days
Hindsight Allow. as a Percent of 1/31/03 Total A/R = 39.4%
Hindsight Allow. as a Percent of 1/31/03 Self Pay A/R = 89.4%
1818
Investor DayInvestor Day20042004HCAHCA 2929
Roll Forward of 110 Day Metric to 3/31/04 Consolidated A/R Agings to Determine the Recommended Allowance
3/31/04 A/R Agings for all Hospitals
Apply Allocation Percents
Recom. Allow.
Over 150 $2,202 100%
100%
34.92%
$ 2,202
121-150 358 358
91-120 429 150
0-90 3,452
Total $ 6,441 $ 2,710
Recommended Allowance based on a 110-day Day Metric = $2,710
Recommended Allowance based on 89.4% of 3/31/04 Self Pay A/R = $2,701
1919
Investor DayInvestor Day20042004HCAHCA 3030
Recorded Allowance as a % of Self Pay A/R
84.6%
87.4%
82.3%
83.6%
82.8%
89.4%
85.2%
82.5% 82.6%
87.0%
88.2%
82.7%
82.4%
81%
83%
85%
87%
89%
91%
93%
Dec-00
Apr-01
Aug-01
Dec-01
Apr-02
Aug-02
Nov-02
Jan-03
Apr-03
Jun-03
Sep-03
Dec-03
Mar-04
Recorded Allow. as % of Self Pay A/R
2020
Investor DayInvestor Day20042004HCAHCA 3131
1Q 2004 Allowance Adjustment
Recommended Allowance Based on Day Metric ($2,710 adjusted for specific hospital deviations)
$ 2,685
Adjustments to Allowance:
- Business Trends (HS% Applied to Self Pay A/R) 42
- Charity (Incremental Increase in Charity w/o’s below
the Day Metric)(26)
Adjusted Recommended Allowance $ 2,701
Allowance as a % of Self Pay A/R 89.4%
(in millions)
2121
Investor DayInvestor Day20042004HCAHCA 3232
New Hospital Allowance Methodology
Self Pay A/R:
Self Pay A/R with no Insurance Due
+ Self Pay A/R with Insurance Due (Co-Pays & Deductibles) $ 2,975
Plus: A/R in Charity 47
Equals: Total Self Pay A/R $ 3,022
Times: Hindsight as a Percent of Self Pay A/R (Based on Quarterly Hindsight):
89.4 %
Needed Allowance for Doubtful Accounts $ 2,701
2222
(in millions)
Investor DayInvestor Day20042004HCAHCA
Beverly WallacePresident – Financial Services Group
2323
Investor DayInvestor Day20042004HCAHCA 3434
Uninsured admissions are relatively small… Uninsured admissions are relatively small… opportunities exist for non-emergent admissionsopportunities exist for non-emergent admissions
MedicareMedicare
103,820103,820
MedicareMedicare
103,820103,820
UninsuredUninsured
13,31313,31374%74%
UninsuredUninsured
13,31313,31374%74%
Managed/ Managed/ MedicaidMedicaid
92,86992,869
Managed/ Managed/ MedicaidMedicaid
92,86992,869
Emergency Emergency 210,002
52%
Emergency Emergency 210,002
52%
Non-EmergencyNon-Emergency 193,662
48%
Non-EmergencyNon-Emergency 193,662
48%
AdmissionsAdmissions403,664 2.5%
AdmissionsAdmissions403,664 2.5%
MedicareMedicare
62,55462,554
MedicareMedicare
62,55462,554
UninsuredUninsured
4,6314,63126%26%
UninsuredUninsured
4,6314,63126%26%
Managed/ Managed/ MedicaidMedicaid
126,477126,477
Managed/ Managed/ MedicaidMedicaid
126,477126,477
52% 48%
74% 26%
Emergency Admissions 6.6% Managed/Medicaid 6.4% Medicare 5.9% Uninsured 15.2%
Non-Emergency Admissions 1.5% Managed/Medicaid 1.5% Medicare 2.1% Uninsured 9.7%
Net % Change 1Q03-04 Net % Change 1Q03-04
1st Quarter 2004 – Eastern & Western Groups
2424
Investor DayInvestor Day20042004HCAHCA 3535
ER has the highest volume of uninsured… ER has the highest volume of uninsured… requires interventionrequires intervention
MedicareMedicare
103,820103,820
MedicareMedicare
103,820103,820
UninsuredUninsured
13,31313,313
UninsuredUninsured
13,31313,313
Managed/ Managed/ MedicaidMedicaid
92,86992,869
Managed/ Managed/ MedicaidMedicaid
92,86992,869
AdmittedAdmitted 210,002AdmittedAdmitted 210,002
ER VisitsER Visits 1,025,639ER VisitsER Visits
1,025,639
ER VisitsER Visits1,235,641 2.3%
ER VisitsER Visits1,235,641 2.3%
MedicareMedicare
109,235109,235
MedicareMedicare
109,235109,235
UninsuredUninsured
231,436231,43695%95%
UninsuredUninsured
231,436231,43695%95%
Managed/ Managed/ MedicaidMedicaid
684,968684,968
Managed/ Managed/ MedicaidMedicaid
684,968684,968
17% 83%
5% 95%
Admitted 6.6% Managed/Medicaid 6.4% Medicare 5.9% Uninsured 15.2%
ER Visits 1.5% Managed/Medicaid 3.3% Medicare 0.5% Uninsured 20.1%
Net % Change 1Q03-04 Net % Change 1Q03-04
1st Quarter 2004 – Eastern & Western Groups
2525
Investor DayInvestor Day20042004HCAHCA 3636
Net Income Improvement OpportunityNet Income Improvement OpportunitySimilar Between Co-Pay/Deductible and Uninsured AccountsSimilar Between Co-Pay/Deductible and Uninsured Accounts
Co-pay & Co-pay & Deductibles Deductibles
Bad DebtBad DebtCharity/Uninsured Charity/Uninsured
Bad Debt Bad Debt
$600 Million$600 Million $2.4 Billion$2.4 Billion25-30%25-30%
$600-720 Million$600-720 MillionCost to HCACost to HCA
Cost to Charge Ratio Cost to Charge Ratio “Full Absorption”“Full Absorption”
20032003
(Carried at Net)(Carried at Net)
(Carried at Gross)(Carried at Gross)
2626
Investor DayInvestor Day20042004HCAHCA 3737
Outpatient Svcs.6%
Direct Admissions
14%
ER Visits41%
Admissions Thru ER39%
75-80%Uninsured Patients
“ “How System is Accessed”How System is Accessed”
20-25%Co-Pay &
Deductibles
Origination of Bad Debt Expense
1Q 01 vs. 1Q 04 front- 1Q 01 vs. 1Q 04 front- end collections end collections 93%, 93%, percent collected percent collected 53%, 53%, co-pays/deductibles co-pays/deductibles 25%25% Intensify collections atIntensify collections at discharge and postdischarge and post dischargedischargeMinimum front-end Minimum front-end deposit requirementsdeposit requirements
2727
Investor DayInvestor Day20042004HCAHCA 3838
Outpatient Svcs.6%
Direct Admissions
14%
ER Visits41%
Admissions Thru ER39%
Bad Debt Action Plan75-80%
Uninsured Patients
Screen all potential non-emergent patients by qualified medical personnelOnce stabilized or deemed non-emergent, proceed with collection effort Mandatory ER case management
Patient Financial Management Committee In-house case management Concurrent financial counseling Standard discharge process
Executive Management approval must be obtained
Minimum deposit standards
Enhanced front-end collection goals
Follow-up care criteria established.
2828
Investor DayInvestor Day20042004HCAHCA 3939
Net Revenue ImpactUnderpayment Recoveries / Overturned Denials
$57.5
$211.7
$137.6
$49.1
-
50
100
150
200
250
2001 2002 2003 1st Q 2004
Mill
ion
s
IncrementalRecoveries
2929
Investor DayInvestor Day20042004HCAHCA 4040
Cost to Collect
Black line indicates Baseline cost
30.00
35.00
40.00
45.00
50.00
55.00
2001 2002 2003 Mar-04
PARS Impact
CTC
3030
Investor DayInvestor Day20042004HCAHCA 4141
Focused Area of Opportunities
1. Improve front-end collections (co-
pay/deductibles)
2. Simplify charity process
3. Case management (ER
& Inpatient)
4. Non-emergent screening (ER
& Inpatient)
3131
Investor DayInvestor Day20042004HCAHCA 4242
Investor DayInvestor Day20042004HCAHCA
Richard M. Bracken
President & Chief Operating Officer
Investor DayInvestor Day20042004HCAHCA 4444
1.1. Patient VolumesPatient Volumes
2.2. Outpatient ServicesOutpatient Services
3.3. Managed Care PricingManaged Care Pricing
4.4. Labor ManagementLabor Management
5.5. Kansas CityKansas City
22
Investor DayInvestor Day20042004HCAHCA 4545
3.5%
2.0%2.6%
1.8%
0.2%
4.3%3.9%
0.9%
2.3%3.4%
2.5%3.0%
0.4%
2.3%1.8%
-0.4%
0.6%2.1%
4.2%3.0%
2.2%
367
388371369373
359
390 397387 388 392
403405
372372
402
366
404 413
380
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
1Q99
2Q99
3Q99
4Q99
1Q00
2Q00
3Q00
4Q00
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
350
400
450
500
550
600
650
19991999 20002000 20012001 20022002 20032003 20042004
1,463+2.7%
1,499+2.8%
1,508+2.7%
1,568+2.5%
1,581+0.6%
Same Facility – Admissions in Thousands
Ad
mis
sio
ns
(000
’s)
– %
f
r om
PY
AdmissionsAdmissions
Q1 2004…Inpatient Volumes Q1 2004…Inpatient Volumes Improved From Recent TrendsImproved From Recent Trends
Ad
mi ssi o
ns (000 ’s)
Percent Change from Prior Year
Admissions (000’s)33
Investor DayInvestor Day20042004HCAHCA 4646
Admissions growth rates vary by market Admissions growth rates vary by market A
dm
issi
on
s C
han
ge
Admissions % Change
(1,500)
(1,000)
(500)
-
500
1,000
1,500
2,000
2,500
-15% -10% -5% 0% 5% 10% 15%
Total Admissions Determine Bubble
Size
Top 15 Top 15 Markets in Markets in AdmissionAdmissions Growths Growth+11,860/+11,860/
+5.9% vs. +5.9% vs. PYPY
Top 15 Top 15 Markets in Markets in AdmissionAdmissions Growths Growth+11,860/+11,860/
+5.9% vs. +5.9% vs. PYPY
Bottom 15 Bottom 15 Markets in Markets in AdmissionAdmissions Growths Growth
-2,773/-2,773/-2.6% vs. -2.6% vs.
PYPY
Bottom 15 Bottom 15 Markets in Markets in AdmissionAdmissions Growths Growth
-2,773/-2,773/-2.6% vs. -2.6% vs.
PYPY
Average Chg.+2.5% 1
Volume Variance by Market – 1st Quarter – Same Market
Houston-2.6%
So. Cal-5.6%
Indiana-12.3%
Far West Una.-3.2%
Treasure Coast-2.4%
Switzerland-6.4%
Las Vegas-0.8%
Dallas/Dallas/Ft. WorthFt. Worth
+5.6%+5.6%
Tampa Tampa BayBay
+3.1%
Austin +6.1%
El Paso+9.7%
Ft. Myers+5.9%
San Antonio
+3.1%
No. VA-3.9%
N. Cent. Fla.+5.2%
Jacksonville+4.5%
San Jose+3.9%
Panhandle+2.7%
N. Monroe-11.0%
Mid America-5.2%
Columbus+1.6%
S.Carolina0.1%
Rio Grande+12.8%
NW Ga.+12.9%
Mid. GA+0.3%
Cent. La.-1.4%Corpus Christi
-1.7%
Nashville+14.9%
Denver 2+6.1%
Richmond+4.9%
1: Same Facility2: Denver is a non-
consolidating JV Market
44
Investor DayInvestor Day20042004HCAHCA 4747Volume Variance by Market – 1st Quarter – Same Market
Total Admissions Determine Bubble
Size
Average Chg.+2.5% 1
-
500
1,000
1,500
2,000
2,500
3,000
0%
Ad
mis
sio
ns
Ch
ang
e
2% 4% 6% 8% 10% 12% 14% 16% 18%
Admissions % Change
N. Cent. Fla.+5.2%
Tampa Tampa BayBay+3.1%
Dallas/Ft. Worth
+5.6%
NashvilleNashville+14.9%+14.9%
Rio Grande+12.8%
NW Ga.+12.9%
El Paso+9.7% Austin
+6.1%
Ft. Myers+5.9%
San Antonio
+3.1%
Panhandle +2.7% San
Jose+3.9% Jacksonville
+4.5%
Denver 2+6.1%
RichmondRichmond+4.9%+4.9%
Top 15 Top 15 Markets in Markets in AdmissionAdmissions Growths Growth+11,860/+11,860/
+5.9% vs. +5.9% vs. PYPY
Top 15 Top 15 Markets in Markets in AdmissionAdmissions Growths Growth+11,860/+11,860/
+5.9% vs. +5.9% vs. PYPY
Q1 2004…Top 15 Markets Performing Q1 2004…Top 15 Markets Performing Above Company Average Above Company Average
Top 15 Markets represent 49% of Total Company
Admissions
1: Same Facility2: Denver is a non-
consolidating JV Market
55
Investor DayInvestor Day20042004HCAHCA 4848
(900)
(800)
(700)
(600)
(500)
(400)
(300)
(200)
(100)
-
100
200
-14% -12% -10% -8% -6% -4% -2% 0% 2% 4%
Average Chg.+2.5% 1
Bottom Bottom 1515 Markets Markets
in in Admissions Admissions
GrowthGrowth-2,773/-2,773/
-2.6% vs. PY-2.6% vs. PY
Bottom Bottom 1515 Markets Markets
in in Admissions Admissions
GrowthGrowth-2,773/-2,773/
-2.6% vs. PY-2.6% vs. PY
Cent. La.-1.4%
Houston-2.6%
So. Cal-5.6%
Switzerland-6.4%
N. Monroe-11.0%Indiana
-12.3%
Mid America-5.2%
No. VA-3.9%
Far West Una.-3.2%
Corpus Christi-1.7%
S.Carolina0.1%
Mid. GA+0.3%
Columbus+1.6%
Las Vegas-0.8%
Treasure Coast-2.4%
Ad
mis
sio
ns
Ch
ang
e
Admissions % ChangeVolume Variance by Market – 1Q 04 vs. PY – Same Facility
Q1 2004…Bottom 15 Markets Performing Q1 2004…Bottom 15 Markets Performing Below Company Average Below Company Average
Bottom 15 Markets represent 25% of Total Company
Admissions
Total Admissions Determine Bubble
Size
1: Same Facility
66
Investor DayInvestor Day20042004HCAHCA 4949
Q1 2004…“Big Earners” Had Strong Admissions Q1 2004…“Big Earners” Had Strong Admissions Growth Growth
Top 15 Earnings Top 15 Earnings markets (69% of markets (69% of Company’s earningsCompany’s earnings11) ) grew +3.5%grew +3.5%22. . (Company Avg.: 2.5%)(Company Avg.: 2.5%)
1: Includes Denver – A non-consolidating JV Market2: Same facility – Q1 04 vs. Prior Year
Dallas/ Ft.
Worth
Tampa Bay
Houston
RichmondNashville
San Antonio
U.K.S. CarolinaPanhandle
DadeUtah
JacksonvilleN. Cent. Fla.Las Vegas
Denver
77
Investor DayInvestor Day20042004HCAHCA 5050
Capital Placed in Service by YearCapital Placed in Service by Year(D
oll
ars
in M
illi
on
s)
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
2000 2001 2002 2003 2004 2005
Western $208 $228 $249 $532 $439 $586
Eastern $341 $145 $427 $691 $434 $143
Total HCA $549 $373 $676 $1,223 $873 $729
2003 projects typically 2003 projects typically approved 24-30 months agoapproved 24-30 months ago
Design&
Permits
Construction
In Service
9 mo.9 mo. 18 mo.18 mo.Approved
Average Timeframe
88
Investor DayInvestor Day20042004HCAHCA 5151
1st Q
uar
ter
Ad
mi s
sio
ns
Ch
ang
e
1st Quarter Admissions % Change
(1,500)
(1,000)
(500)
-
500
1,000
1,500
2,000
2,500
-15% -10% -5% 0% 5% 10% 15%
Total Admissions Determine Bubble
Size
Same Market
$970M$970M in Major in Major Projects completed Projects completed
in 16 Marketsin 16 Markets
$970M$970M in Major in Major Projects completed Projects completed
in 16 Marketsin 16 Markets
Capital Investment Strategy Supports Improved Capital Investment Strategy Supports Improved Admissions GrowthAdmissions Growth
Tampa Tampa BayBay
+3.1%+3.1%
Dallas/Ft. Worth+5.6%
N. Cent. Fla.+5.2%
Jacksonville+4.5%
S. Carolina+0.1%
Austin +6.1%
El Paso9.7%
So. Cal.-5.6%
Panhandle+2.7%
Palm Beach+0.9%
Reston+0.5%
Richmond+4.9%
WesleyWesley+3.3%+3.3%
Denver 2+6.1%
Nashville+14.9%
Rio Grande+12.8%
Markets with Major Project Completions 2Q03-4Q03
Average Chg.+2.5% 1
1: Same Facility2: Denver is a non-
consolidating JV Market
99
Investor DayInvestor Day20042004HCAHCA 5252
2.4%3.7%
2.6%1.1%
0.1%
4.0%4.4%
2.3%
-0.8%
2.6% 2.5%
-0.7%
0.3%1.8%
3.3%
3.2%4.2%
2.8%
2.2%
1.6%
4.6%
114111 110
119 117 115 114120 120
117 118
127 129 129 128 128 129 130 128131
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
1Q99
2Q99
3Q99
4Q99
1Q00
2Q00
3Q00
4Q00
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
100
110
120
130
140
150
160
170
180
190
200
Q1 2004…Some Rebound In Q1 2004…Some Rebound In Inpatient SurgeriesInpatient Surgeries
Inpatient SurgeriesInpatient Surgeries
19991999 20002000 20012001 20022002 20032003 20042004
Same Facility – Surgeries in Thousands
Inp
atie
nt
Su
rge
ries
- %
Ch
ang
e f r
om
Pri
or
Ye
ar 444+2.2%
462+3.5%
471+3.6%
514+2.8%
514-0.2%
Inp
atient S
urg
eries
Percent Change from Prior Year
Inpatient Surgeries (000’s)1010
Investor DayInvestor Day20042004HCAHCA 5353
141,627145,139
139,763
134,348
138,121
132,868134,769
137,700
143,672140,647
147,248
136,429
125,000
150,000
50,44252,090
57,944 57,749
52,167 52,70054,414
60,69958,099
59,685
52,07454,387
51,715
50,000
75,000
1Q 01 2Q 01 3Q 01 4Q 01 1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04
20012001 20022002 20032003 20042004
HOSPITAL BASEDASC BASED
HospitalBased
Same Facility
Q1 2004…Outpatient trends show slight Q1 2004…Outpatient trends show slight recoveryrecovery
ASCBased
207,135-3.2%
217,887+4.0%
233,475+2.1%
554,969-0.5%
574,153+1.5%
539,501-5.1%
+1.0%1st Qtr.
+3.5%1st Qtr.
Ou
tpat
ien
t S
urg
erie
s
Outpatient SurgeriesOutpatient Surgeries
1111
Investor DayInvestor Day20042004HCAHCA 5454
Q1 2004…Outpatient trends show slight Q1 2004…Outpatient trends show slight recoveryrecovery
20012001 20022002 20032003 20042004
HOSPITAL BASEDASC BASED
-0.5%0.5%
3.2%2.3%
-0.7%
2.1%
3.3%
-4.4%
-5.7%-5.1%
-5.3%
2.2%0.1%-0.3%
-3.8%
2.1%1.0%
-8.3%
-4.0%
2.0%
3.5%
1.3%1.7%
1.9%
4.9%5.3%
-10%
0%
10%
1Q 01 2Q 01 3Q 01 4Q 01 1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04
-3.2% +4.0% +2.1%
-0.5% +1.5% -5.1%
ASCBased
HospitalBased
Same Facility – Percent Change from Prior Year
Ou
tpa
tie
nt
Su
rger
ies
- %
Ch
ang
e fr
om
Pri
or
Yea
r
Outpatient SurgeriesOutpatient Surgeries
1212
Investor DayInvestor Day20042004HCAHCA 5555
Outpatient Diagnostic ServicesOutpatient Diagnostic Services
14.3% 14.1%
9.1%7.1%
9.3%
15.2%12.7% 13.7%
19.8%
0%
10%
20%
CT Scan
5.1% 7.0%
0.2% 0.6% 1.5%6.9%
13.7% 12.9%
-0.2%
-10%
0%
10%
20%
MRIMRI
1.5%
11.9%7.7% 7.6% 6.0% 7.6%
14.5% 13.7%
-0.7%-10%
0%
10%
20%
Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04
CardiacCath
20022002 20032003 20042004
1313Same Facility – Percent Change from Prior Year
Investor DayInvestor Day20042004HCAHCA 5656
1. Despite improved Q1, too soon to declare recovery
2. Admission growth rates vary widely by market
3. Hospitals comprising majority of revenue base (58% of Revenues) performing better than Company averages (Excluding Houston)
4. Uninsured had modest impact on patient growth rates in Q1
5. Capital investment strategy supports improved admissions growth
6. Surgical trends improved Q1 04
HCA Patient Volume – Key ObservationsHCA Patient Volume – Key Observations
1414
Investor DayInvestor Day20042004HCAHCA 5757
Outpatient ServicesOutpatient Services
1515
Investor DayInvestor Day20042004HCAHCA 5858
9.4%
37.2%
OutpatientOutpatientERER
OutpatientOutpatientERER
Outpatient Services comprised of three Outpatient Services comprised of three business linesbusiness lines
12.5%Hospital BasedHospital BasedHospital BasedHospital Based
FreestandingFreestandingFreestandingFreestanding
OutpatientOutpatientDiagnostic Diagnostic ServicesServices
OutpatientOutpatientDiagnostic Diagnostic ServicesServices
ImagingImagingCardiologyCardiologyOncologyOncologyOrthopedicsOrthopedicsNeurologyNeurology
ImagingImagingCardiologyCardiologyOncologyOncologyOrthopedicsOrthopedicsNeurologyNeurology
Hospital BasedHospital BasedHospital BasedHospital BasedOutpatient Outpatient SurgeriesSurgeriesOutpatient Outpatient SurgeriesSurgeries
15.3%ASC BasedASC BasedASC BasedASC Based
70%
30%
2003% of HCA
Net Revenue
As a % of Outpatient Surgeries
1616
Investor DayInvestor Day20042004HCAHCA 5959
Delivered in Two Distinct LocationsDelivered in Two Distinct Locations
1717
9.4%
37.2%
OutpatientOutpatientERER
OutpatientOutpatientERER
12.5%Hospital BasedHospital BasedHospital BasedHospital Based
FreestandingFreestandingFreestandingFreestanding
OutpatientOutpatientDiagnostic Diagnostic ServicesServices
OutpatientOutpatientDiagnostic Diagnostic ServicesServices
ImagingImagingCardiologyCardiologyOncologyOncologyOrthopedicsOrthopedicsNeurologyNeurology
ImagingImagingCardiologyCardiologyOncologyOncologyOrthopedicsOrthopedicsNeurologyNeurology
Hospital BasedHospital BasedHospital BasedHospital BasedOutpatient Outpatient SurgeriesSurgeriesOutpatient Outpatient SurgeriesSurgeries
15.3%ASC BasedASC BasedASC BasedASC Based
70%
30%
2003% of HCA
Net Revenue
As a %of Outpatient SurgeriesHospital BasedHospital Based
•Service/convenience strategy i.e.: improved Service/convenience strategy i.e.: improved access, dedicated parking, shortened registration access, dedicated parking, shortened registration process and extended hours of scheduling.process and extended hours of scheduling.
•Physician service/preference strategy i.e.: same Physician service/preference strategy i.e.: same day appointments, rapid report turn around, block day appointments, rapid report turn around, block OR scheduling, integrated patient scheduling, and OR scheduling, integrated patient scheduling, and on-line clinical reports.on-line clinical reports.
•Competitive managed care pricingCompetitive managed care pricing
Investor DayInvestor Day20042004HCAHCA 6060
Delivered in Two Distinct LocationsDelivered in Two Distinct Locations
1818
9.4%
37.2%
OutpatientOutpatientERER
OutpatientOutpatientERER
12.5%Hospital BasedHospital BasedHospital BasedHospital Based
FreestandingFreestandingFreestandingFreestanding
OutpatientOutpatientDiagnostic Diagnostic ServicesServices
OutpatientOutpatientDiagnostic Diagnostic ServicesServices
ImagingImagingCardiologyCardiologyOncologyOncologyOrthopedicsOrthopedicsNeurologyNeurology
ImagingImagingCardiologyCardiologyOncologyOncologyOrthopedicsOrthopedicsNeurologyNeurology
Hospital BasedHospital BasedHospital BasedHospital BasedOutpatient Outpatient SurgeriesSurgeriesOutpatient Outpatient SurgeriesSurgeries
15.3%ASC BasedASC BasedASC BasedASC Based
70%
30%
2003% of HCA
Net Revenue
As a %of Outpatient Surgeries
Freestanding Surgery Centers Freestanding Surgery Centers (ASCs)(ASCs)
76 Centers Operational76 Centers Operational11 new centers coming on line over next 12 months11 new centers coming on line over next 12 months
8 additional projects in various stages of development (12-18 8 additional projects in various stages of development (12-18 month horizon)month horizon)
25 other projects currently under review25 other projects currently under review
* * ** * *• Dedicated division based development teams (increase Dedicated division based development teams (increase
pipeline)pipeline)• Recruiting surgical specialties (offer ownership opportunities as Recruiting surgical specialties (offer ownership opportunities as
a component of recruitment package)a component of recruitment package)• Adding capacity to existing ASCsAdding capacity to existing ASCs• Modifying equity model/re-syndication as appropriateModifying equity model/re-syndication as appropriate• Reserving space in new MOBs for outpatient unitsReserving space in new MOBs for outpatient units
Investor DayInvestor Day20042004HCAHCA 6161
Delivered in Two Distinct LocationsDelivered in Two Distinct Locations
1919
9.4%
37.2%
OutpatientOutpatientERER
OutpatientOutpatientERER
12.5%Hospital BasedHospital BasedHospital BasedHospital Based
FreestandingFreestandingFreestandingFreestanding
OutpatientOutpatientDiagnostic Diagnostic ServicesServices
OutpatientOutpatientDiagnostic Diagnostic ServicesServices
ImagingImagingCardiologyCardiologyOncologyOncologyOrthopedicsOrthopedicsNeurologyNeurology
ImagingImagingCardiologyCardiologyOncologyOncologyOrthopedicsOrthopedicsNeurologyNeurology
Hospital BasedHospital BasedHospital BasedHospital BasedOutpatient Outpatient SurgeriesSurgeriesOutpatient Outpatient SurgeriesSurgeries
15.3%ASC BasedASC BasedASC BasedASC Based
70%
30%
2003% of HCA
Net Revenue
As a %of Outpatient Surgeries
Freestanding Imaging CentersFreestanding Imaging Centers10-15 sites in planning and expected to come on line over the next 12 10-15 sites in planning and expected to come on line over the next 12
monthsmonths16 sites under review or with letters of intent for acquisition / joint venture16 sites under review or with letters of intent for acquisition / joint venture
* * ** * *
• Investing capital in freestanding imaging, cardiac cath and radiation Investing capital in freestanding imaging, cardiac cath and radiation oncology centers (includes ownership opportunities for physicians)oncology centers (includes ownership opportunities for physicians)
• ““Acquisition strategy” more likely in mature markets such as Florida and Acquisition strategy” more likely in mature markets such as Florida and TexasTexas
• ““Build strategy” more likely in less mature markets such as Colorado, Build strategy” more likely in less mature markets such as Colorado, Virginia, Georgia, and South CarolinaVirginia, Georgia, and South Carolina
• Developing full-service models (oncology, cardiology, orthopedics) as Developing full-service models (oncology, cardiology, orthopedics) as opposed to single modality centers (minimizes risk due to reimbursement opposed to single modality centers (minimizes risk due to reimbursement changes or exclusion from contracts)changes or exclusion from contracts)
Investor DayInvestor Day20042004HCAHCA 6262
Managed Care PricingManaged Care Pricing
2020
Investor DayInvestor Day20042004HCAHCA 6363
2004 Managed Care Contracting
2005 Contract
Pricing Timeline*
6,844 Facility Level Active Contracts
*Anticipated Completion Dates
Pre-2004 1Q04 2Q04 3Q04 4Q04
83% of 2004 and 42% of 2005 contracts 83% of 2004 and 42% of 2005 contracts completed.completed.
83% of 2004 and 42% of 2005 contracts 83% of 2004 and 42% of 2005 contracts completed.completed.
2005Cumulative
42%42% 55%55% 75%75% 95%95%35%35% 100%100%
15.0%
10.5% 11.4%13.0% 13.3%
9.6%7.0% 7.3%
11.1%
0%
16%
1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04
11.1% 9.9%
Net Revenue per Adjusted AdmissionManaged Care & Other Discounted
2121
Investor DayInvestor Day20042004HCAHCA 6464
Operating ExpensesOperating Expenses
2222
Investor DayInvestor Day20042004HCAHCA 6565
4.7%
8.1%5.4%
5.6% 5.5% 5.3%
3.8%
6.0%6.2%
7.5%
9.3%
7.4%7.8%
5.5%
10.4%
7.6%
8.9%
10.8%10.2%
8.0%
6.0%7.0%
8.8%8.5%8.0%
5.2%
-1%
1%
3%
5%
7%
9%
11%
13%
15%
1Q 01 2Q 01 3Q 01 4Q 01 1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04
20012001 20022002 20032003 20042004
7.0% 9.4%7.4%
6.4%6.7%6.5%
Same Facility – Percent Change from Prior Year
Bad Debt Impact on Operating Expenses per Bad Debt Impact on Operating Expenses per Adjusted AdmissionAdjusted Admission
Op
erat
ing
Exp
en
ses /
AA
– P
erc
en
t C
han
ge
fro
m P
rio
r Y
ear
Operating Expense/AA Operating Expense/AA (Adj. For Bad Debt)
2323
Investor DayInvestor Day20042004HCAHCA 6666
Labor costs: Favorable Trends ContinueLabor costs: Favorable Trends Continue
IncreasingIncreasingLabor RateLabor Rate
7.2%
3.7%5.0%
6.3%8.6%8.1%
9.6%10.4%9.7%
1.6%
9.8%
6.9%
10.3%
0%
15%
7.0%
4.4%4.9%4.7%5.2%5.4%5.0%5.4%7.0%
4.5%4.8%4.8%6.4%
0%
10%
20012001 20022002 20032003 20042004
9.6% 8.3% 5.7%
6.5% 5.1% 4.7%
SW&B/AA% Change% Change
Wage Rate% Change% Change
Same Facility
Utilization ofUtilization ofPremium Premium
Contract LaborContract Labor
38.7%37.7%
38.7%38.4%
39.8%39.6%38.5%
40.1%39.7%
38.3%38.5%38.9%39.8%
35%
42%
1Q 01 2Q 01 3Q 01 4Q 01 1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04
SW&B% of Net% of Net
39.4% 39.2% 38.5%
2424
Investor DayInvestor Day20042004HCAHCA 6767
Controlling premium laborControlling premium labor
9.2% 8.7% 8.6%
6.7% 6.2% 6.5%8.0%
9.6%9.4%
4%
12%
1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04
$48
$34$41
$29$36
$25
$32
$23
$34
$23
$0
$10
$20
$30
$40
$50
2003 Q1Actual
2003 Q2Target
2003 Q3Target
2003 Q4Target
2004 Q1Actual
15%vs. Q1
15%vs. Q1
$41/APD $28/APD $35/APD$24/APD
(2nd Qtr. Actual) (3rd Qtr. Actual) (4th Qtr. Actual)
$32/APD$22/APD
25%vs. Q1
25%vs. Q1
33%vs. Q1
33%vs. Q1
29%vs. ‘03 Q1
29%vs. ‘03 Q1
(1st Qtr. Actual)
* Eastern and Western Consolidated Operations
Per Adjusted Patient Day
Per Adjusted Patient Day
As a Percent of Salaries
As a Percent of Salaries
NursingTotal Ops.*
Actual
Consolidated
Co
ntr
act
Lab
or
Co
ntr
act
Lab
or/
AP
D
2525
Investor DayInvestor Day20042004HCAHCA 6868
……while employee satisfaction at record levelswhile employee satisfaction at record levels
26.7%25.9%
22.8%
20.1%
18.8%18.3%
17.0% 16.8%
3.5%
3.6%
3.7%
3.8%
15%
20%
25%
30%
2000 2001 2002 2003
3.3%
3.4%
3.5%
3.6%
3.7%
3.8%
3.9%
Employee Satisfaction(Gallup Score)
Employee Turnover
Nurse Turnover
Tu
rno
ver
Rat
eS
atisfaction
Sco
re
2626
Investor DayInvestor Day20042004HCAHCA 69692727
5.9%
9.1%
7.3%
7.7%
8.3%
10.2%9.3%
6.0%
8.2%
7.6%
9.5%
7.4%
9.6%
0%
15%
1Q 01 2Q 01 3Q 01 4Q 01 1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04
Supply costs driven by new technologySupply costs driven by new technology
20012001 20022002 20032003 20042004
7.3% 8.9% 8.1%
HCA Initiatives• Fully Implemented Shared Services
Model.• Created GPO – now the 3rd largest
group purchasing organization nationally.
• Division based procurement: limited the number of vendors for high volume implants.
• Supply Management Action Teams: hospital level program focused on supply utilization.
HCA Initiatives• Fully Implemented Shared Services
Model.• Created GPO – now the 3rd largest
group purchasing organization nationally.
• Division based procurement: limited the number of vendors for high volume implants.
• Supply Management Action Teams: hospital level program focused on supply utilization.
60%
21%
13%
0%
10%
20%
30%
40%
50%
60%
TechnologyDriversTechnologyDrivers
Coronary Stents
Spinal Implants
Orthopedic Implants
Single Single LargestLargest Driver Driver of Supply Expenseof Supply Expense
Same Facility % Change from PY
Su
pp
l ies/
AA
%
Ch
an
ge
fro
m P
rio
r Y
ea
r
Investor DayInvestor Day20042004HCAHCA 7070
Ethicsand
ComplianceProgram
Ethicsand
ComplianceProgram
1998 1999 2000 2001 2002 2003 2004
Net Revenue Plan
Managed Care
Contracting
Net Revenue Plan
Managed Care
Contracting
PatientSafetyPatientSafety
Employer of ChoiceEmployer of Choice
NEXT
GENERATION
NEXT
GENERATIONShared
ServicesShared
Services
Leveraging our economies of scale and prior project experience into new clinical and best practice initiatives
Shared Services (Phase 2)Shared Services (Phase 2)
•Bad Debt ManagementBad Debt Management•Centralized CodingCentralized Coding•Teleradiology/PACsTeleradiology/PACs•Centralized monitoring of patients Centralized monitoring of patients (Digital ICU)(Digital ICU)
•Centralized Lab & Pharmacy Centralized Lab & Pharmacy •Division based physician recruitmentDivision based physician recruitment
•Clinical Initiatives: Clinical Initiatives: •ED efficiency/wait time ED efficiency/wait time •OR utilizationOR utilization•ICU effectivenessICU effectiveness•Perinatal trainingPerinatal training•Nosocomial InfectionsNosocomial Infections
Sharpen the Organizational AgendaSharpen the Organizational Agenda
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Investor DayInvestor Day20042004HCAHCA 7171
Market UpdateMarket Update: Kansas City: Kansas CityFinancial Impact to HCA
2003 YTD(April-Dec)
Midwest Division Revenue
$698M $217M
MARGIN (40) b.p. (50) b.p.
EPS ($0.04) ($0.01)
1Q 2004
Dilutive Impact to HCA:
Market Summary & Highlights• New management structure in place• Admission run rate stabilizes & turns positive in first 12 months
• $71M in capital expenditures in 1st year ($450M committed)
• Re-opened Trauma Services and Heart Program in Market
• Recruited 19 new physicians
HCA Midwest Division Hospitals
• Acquired April 1, 2003• 12 Hospitals (1 Mgmt. Contract) • 2 ASCs
• IT Systems deployed• Managed Care Contract renewal complete; ’04 average increase 9%
• Reduced Salaries & Wages $30M or 562 FTEs (190 were overhead & infrastructure)
• Won unionization attempt at Research Med Center (largest facility)
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Investor DayInvestor Day20042004HCAHCA 7272
Investor DayInvestor Day20042004HCAHCA
Frank Houser, M.D.Corporate Medical Director & Senior Vice President,
Quality
Investor DayInvestor Day20042004HCAHCA 7474
Electronic Medication Administration Record(eMAR)
• Serious Preventable Adverse Drug Events occur in 2% of all hospital admissions and result in increased costs through extended length of stays, increased resource use, and greater malpractice costs.
• eMAR is proving very effective in reducing medication errors in HCA hospitals by at least one-third.
• eMAR is better patient care that saves money.
22
Investor DayInvestor Day20042004HCAHCA 7575
Electronic Provider Order Management(ePOM)
• 34 hospitals have applied to pilot the ePOM software that our physicians helped develop with Meditech. Ten will be selected.
• The software will provide significant competitive advantage to our hospitals beginning in 2005.
• The combination of eMAR and ePOM will dramatically reduce Medication Errors and Preventable Adverse Drug Events in HCA hospitals.
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Investor DayInvestor Day20042004HCAHCA 7676
CABG Mortality Rate
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%3Q
98
4Q98
1Q99
2Q99
3Q99
4Q99
1Q00
2Q00
3Q00
4Q00
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
HCA National
Data Source: HCA Data – CHOIS Nat’l Comparative Data - Solucient
Quality Outcomes
CABG: DRG 106, 107, or 109
44
Investor DayInvestor Day20042004HCAHCA 7777
Cardiovascular
• HCA Cardiovascular Centers of Excellence internal recognition program developed in conjunction with our physician panel to begin in fourth quarter.
55
Investor DayInvestor Day20042004HCAHCA 7878
Perinatal
• All 3,800 Labor and Delivery nurses in the HCA system are AHWONN certified in the interpretation of fetal monitoring.
• Better OB outcomes mean increased C-Sections, less VBACs, and less forceps and vacuum extractions.
• The frequency of OB malpractice claims at HCA have significantly decreased.
• Another competitive advantage for HCA hospitals.
66
Investor DayInvestor Day20042004HCAHCA 7979
Actual Score
Weighted Score
Potential Score
Emory Eastside Med
Ctr %
HCA Average
%
15.0
20.0
5.0
5.0
5.0
5.0
N/S
5.0
6.67
6.66
6.67
5.00
5.0
5.0
5.0
100.00 0
N/S = Not Scored (not applicable, not surveyed, or insufficient data)
Percent of Potential Score
Patient Safety Improvement Submission
Adult ICU Coverage
Patient Safety Improvement Validation
Satisfaction Survey Results
Inpatient Would Return
Physician Would Recommend
Vag Delivery w 3rd / 4th degree laceration Rate
Overall Surg Complication Rate
AMI Mortality Rate
Employee Would Recommend
ER Patient Satisfaction
Outcome Measures
QRS Measures
Surveys
J CAHO Standards Survey
Quality Standards Survey
Patient Safety
Disaster Readiness
TOTAL QRS SCORE
Medical Necessity
Professional Liability Experience
Professional Liability Experience Score
CURRENT
Hospital percent is better than or equal to the HCA percent
Hospital percent is worse than the HCA percent
Acute Med/Surg without CV Surgery
77
Investor DayInvestor Day20042004HCAHCA